Developments of Interest

New Cases of Interest - February 28, 2013

02/28/2013

Tom Jones Enterprises, Ltd. v. County of Los Angeles (2013) 212 Cal.App.4th 1283. This was a case in which certain judgment creditors brought an action against the County of Los Angeles alleging that a county employee had negligently caused the release of funds which belonged to the creditors and had been obtained pursuant to a writ of execution. A demurrer was sustained to the complaint without leave to amend and the negligence action brought by the judgment creditors was dismissed. The court of appeal affirmed concluding that the litigation privilege in Civil Code § 47(b) was applicable in the government claims context and barred the action. That litigation privilege was sufficiently broad enough to apply to the negligent release of funds obtained as a result of a levy in that the negligent release was related to the litigation purpose of collecting a judgment.

R. E. Loans, LLC v. Investors Warranty of America, Inc. (2013) 212 Cal.App.4th 1432. This was an action in which a junior lienholder as part of a refinancing transaction had subordinated its existing trust deed to a new deed of trust in favor of the senior lienholder. It turned out that the senior lienholder's new trust deed secured not only the note on the property in which the junior lienholder held a secured interest, but also two other notes. The notes each contained cross-default provisions. A notice of default was recorded on the senior lien noting the amount necessary to cure the default was the total amount owed under all of the notes.

The court of appeal held that securing additional loans did not breach the subordination agreement because those notes were separate loans. The junior lienholder's trust deed was subordinate only to the specified note he had agreed to subordinate to. The junior lienholder could protect its interest by curing the default solely under the note it had agreed to subordinate to and was not affected by the cross-default provisions or the notice of default.